UK Businesses Cut Jobs at ‘Fastest Pace Since 2009’ Excluding the Pandemic
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Loading... - Thomas Bourgeois
- 24 Jan 2025
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UK businesses are experiencing significant job cuts, with the pace of layoffs reaching the highest level since the financial crisis of 2009, excluding the impact of the Covid-19 pandemic. This alarming trend has emerged as rising costs have reignited fears of stagflation within the British economy at the start of the year, according to a recent survey.
The S&P Global flash purchasing managers’ survey, released on Friday, indicated that the rate of job losses in December and January was the steepest recorded since the global financial crisis, aside from the onset of the pandemic in 2020. The survey also revealed that cost burdens on businesses have surged at the fastest rate in over a year and a half. Many companies have responded to these rising costs by increasing prices for consumers, resulting in the most significant rise in average prices charged since July 2023.
Chris Williamson, an economist at S&P Global Market Intelligence, commented on the survey's findings, stating, “The results add to the gloom about the UK economy, with companies cutting employment amid falling sales and concerns about business prospects.” He further warned that inflationary pressures have “reignited,” indicating a stagflationary environment that presents a growing challenge for the Bank of England.
The survey attributed the decline in employment to several factors, including hiring freezes and the decision not to replace employees who voluntarily leave, largely due to rising payroll costs. Many businesses pointed to the Labour government’s decision to increase employers’ national insurance contributions, effective in April, as a reason for scaling back recruitment plans. Additionally, a post-Budget slump in business confidence has further exacerbated the situation.
Despite the concerning job cuts, the headline S&P Global flash UK PMI composite output index, which measures overall activity in the private sector, rose to a three-month high of 50.9 points in January, up from 50.4 in December. Economists had anticipated a slight decline to 50 points. A reading above 50 indicates that most businesses are reporting growth in activity.
Elias Hilmer, an economist at Capital Economics, noted that while the PMI figures do not alleviate the Bank of England’s concerns regarding weak economic activity, the strengthening price pressures suggest that any rate cuts will be gradual. He expects the Bank of England to reduce rates by a quarter point to 4.5% in February.
The UK economy has shown no growth in the three months leading up to September, marking a sharp slowdown from the 0.4% growth recorded in the previous quarter. The Bank of England also anticipates no growth in the final quarter of 2024, further underscoring the challenges facing the UK economy.
As businesses navigate rising costs and declining confidence, the implications for employment and economic stability remain significant, prompting ongoing scrutiny from policymakers and economists alike. The current economic climate raises concerns about the sustainability of job levels and the overall health of the UK economy moving forward.
